More Than 53,000 American Companies Sought Exemptions From Trump's China Tariffs. Almost All Were Denied.
New GAO report says the process for determining which companies could avoid paying those tariffs was rife with "inconsistencies" and poorly documented decision-making.
The bureaucratic process established by the Trump administration to determine which American companies should be exempted from paying tariffs on imports from China is a black box of "inconsistencies" and poorly documented decision-making, according to a new audit.
In a report published last week, the Government Accountability Office (GAO) cast a critical eye on the so-called "tariff exclusion process" created in 2018 as part of the Trump administration's efforts to slap tariffs on a wide range of imports from China. The process, overseen by the Office of the U.S. Trade Representative, allowed American businesses to appeal to the federal government for permission to not pay tariffs if they could demonstrate that a given product was not available from other sources, or if a business faced "severe economic harm" due to the tariffs.
Between 2018 and 2020, American businesses submitted more than 53,000 exclusion requests. The vast majority—87 percent—were denied, and most of the denials were on the grounds that the company failed to demonstrate sufficient economic harm to the Office of the U.S. Trade Representative, the GAO found.
In other words, federal bureaucrats reviewed tens of thousands of statements from companies pointing out how the Trump administration's tariffs would cause economic harm—because, yes, Americans paid for the tariffs—then discarded most of those requests because the harms were not "severe" enough.
What's even worse is that there's very little in the way of objectivity or due process afforded to companies that had their exclusion requests denied. Soon after the tariffs were imposed, members of Congress warned that the exclusion process lacked "basic due process and procedural fairness" and that it could be "abused for anticompetitive purposes." As Reason previously reported, business owners have complained that simply getting a decision one way or the other can take months. And there is no way to appeal the rulings.
The new GAO report confirms some of those concerns.
"USTR documented some procedures for reviewing exclusion requests. However, it did not fully document all of its internal procedures, including roles and responsibilities for each step in its review process," the GAO found. "Without fully documented internal procedures, USTR lacks reasonable assurance it conducted its reviews consistently."
A similar exclusion process was established by the Department of Commerce to handle the tariffs on steel and aluminum imports, and it was almost immediately captured by special interests. Domestic steel and aluminum manufacturers exerted "improper influence" over the opaque and confusing process, a 2019 inspector general report found.
Without an objective and well-documented decision-making process, government agencies handling tariff exclusion requests are inviting more of that influence. But even that is somewhat beside the point—because tariffs are always about protecting certain industries, and protecting certain industries always invites influence-peddling.
"There is no telling how much money companies spent seeking tariff exemptions, on top of the direct cost of Section 301 tariffs," says Bryan Riley, director of the free trade project at the National Taxpayers Union Foundation. "The process needs to be improved, or even better, the U.S. should drop the tariffs and look for more effective ways to deal with China."